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Forex: Ideas You Can Trade - AUDUSD Sharp Correction Signals Change

Posted by Steven Hatzakis on Sep 23, 2014 3:15:00 AM

AUDUSD: .8658 Next if Bearish Continuation Persists

The daily candle chart below shows the price history of the Australian Dollar (AUD) versus the United States Dollar (USD), known as the AUDUSD pair, and trading near .8897 around time of publication today.

Last time this pair was reviewed earlier in September in Ideas You Can Trade, AUDUSD had just broken under the lower support line of a short term bearish channel (point 3 in white on chart below) and a steep bearish continuation line (point 5 in red on chart below) had been drawn on the previous chart from that post.

Since then the pair followed that steep bearish line nearly exactly as the bearish momentum accelerated. A low of .8851 reached just yesterday had last been reached in February, and if support on that line fails the next target could be near .8658 - the January year-to-date (YTD) low.

On the flipside if support near yesterday's low holds then a floor could be established, validating the YTD low from February. However, the amount of bearish pressure from the sharp correction seem likely to push AUDUSD to a new YTD low.

From a slightly longer-term perspective the medium term bearish channel (point 1 in magenta on chart below) could be resuming to take over the trend, and if so would mean that AUDUSD could even head towards .8300 in the next few weeks or months ahead (if it attempts to re-enter the top of that channel).

Below are examples of how to trade a bearish continuation or a bullish reversal:

1. Bullish Buy Entry Order: Create a "Buy Entry Stop" @.8961 with a Limit to take profit @.8995 and a stop-loss @ .8931 Risk/Reward Summary: Limit risk = +34 pips profit / (-30) Stop-loss risk = Gain to Loss ratio = 1.13

2. Bearish Sell Entry Order: Create a "Sell Entry Stop" @ .8849 with a Limit to take profit @ . 8819 and a stop-loss @ .8875 Risk/Reward Summary: Limit risk = +30 pips profit / (-26) Stop-loss risk = Gain to Loss Ratio = 1.15

Medium Term Daily Candle Chart: 

AUDUSDDaily sept 23 2014 note

 

Medium Term Daily Candle Chart zoomed: 

AUDUSDDaily sept 23 2014 note zoomed

Topics: AUDUSD, forex trading, technical analysis, USD, aud, Aussie Dollar, Australian Dollar

 

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